Mục Lục

7 types of organizational structures (+ org charts for implementation)

Reading time: about 7 min

Posted by: Shannon Williams

At some point, you have likely seen an organizational chart for your company. And we can probably guess what it looked like.

The typical org chart looks like a pyramid, your C-level executives at the top with lines stretching down to middle management and finally staff-level employees.

But not every company functions best with a hierarchical organizational structure. Many types of organizational charts exist because many types of organizational structures exist.

Let’s go through the seven common types of org structures and reasons why you might consider each of them.

1. Hierarchical org structure

Hierarchical org chart example (click on image to modify online)

The pyramid-shaped organizational chart we referred to earlier is known as a hierarchical org chart. It’s the most common type of organizational structure—the chain of command goes from the top (e.g., the CEO or manager) down (e.g., entry-level and low-level employees), and each employee has a supervisor.

Pros

Better defines levels of authority and responsibility
Shows who each person reports to or who to talk to about specific projects
Motivates employees with clear career paths and chances for promotion
Gives each employee a specialty
Creates camaraderie between employees within the same department

Cons

Can slow down innovation or important changes due to increased bureaucracy
Can cause employees to act in interest of the department instead of the company as a whole
Can make lower-level employees feel like they have less ownership and can’t express their ideas for the company

2. Functional org structure

Functional org chart example (click on image to modify online)

Similar to a hierarchical organizational structure, a functional org structure starts with positions with the highest levels of responsibility at the top and goes down from there. Primarily, though, employees are organized according to their specific skills and their corresponding function in the company. Each separate department is managed independently.

Pros

Allows employees to focus on their role
Encourages specialization
Help teams and departments feel self-determined
Is easily scalable in any sized company

Cons

Can create silos within an organization
Hampers interdepartmental communication
Obscures processes and strategies for different markets or products in a company

3. Horizontal or flat org structure

horizontal org chart Horizontal or flat org chart example (click on image to modify online)

A horizontal or flat organizational structure fits companies with few levels between upper management and staff-level employees. Many start-up businesses use a horizontal org structure before they grow large enough to build out different departments, but some organizations maintain this structure since it encourages less supervision and more involvement from all employees.

Pros

Gives employees more responsibility
Fosters more open communication
Improves coordination and speed of implementing new ideas

Cons

Can create confusion since employees do not have a clear supervisor to report to
Can produce employees with more generalized skills and knowledge
Can be difficult to maintain once the company grows beyond start-up status

Market-based divisional org structure Market-based divisional org chart example (click on image to modify online)

4. Divisional org structure

In divisional organizational structures, a company’s divisions have control over their own resources, essentially operating like their own company within the larger organization. Each division can have its own marketing team, sales team, IT team, etc. This structure works well for large companies as it empowers the various divisions to make decisions without everyone having to report to just a few executives.

Depending on your organization’s focus, there are a few variations to consider.

Market-based divisional org structure

Divisions are separated by market, industry, or customer type. A large consumer goods company, like Target or Walmart, might separate its durable goods (clothing, electronics, furniture, etc.) from its food or logistics divisions.

Product-based divisional org chart example (click on image to modify online)

Product-based divisional org structure

Divisions are separated by product line. For example, a tech company might have a division dedicated to its cloud offerings, while the rest of the divisions focus on the different software offerings—e.g., Adobe and its creative suite of Illustrator, Photoshop, InDesign, etc.

Geographical divisional org chart example (Click on image to modify online)

Geographic divisional org structure

Divisions are separated by region, territories, or districts, offering more effective localization and logistics. Companies might establish satellite offices across the country or the globe in order to stay close to their customers.

Matrix org chart example (click on image to modify online)

Pros

Helps large companies stay flexible
Allows for a quicker response to industry changes or customer needs
Promotes independence, autonomy, and a customized approach

Cons

Can easily lead to duplicate resources
Can mean muddled or insufficient communication between the headquarters and its divisions
Can result in a company competing with itself

5. Matrix org structure

A matrix organizational chart looks like a grid, and it shows cross-functional teams that form for special projects. For example, an engineer may regularly belong to the engineering department (led by an engineering director) but work on a temporary project (led by a project manager). The matrix org chart accounts for both of these roles and reporting relationships.

Pros

Allows supervisors to easily choose individuals by the needs of a project
Gives a more dynamic view of the organization
Encourages employees to use their skills in various capacities aside from their original roles

Cons

Presents a conflict between department managers and project managers
Can change more frequently than other organizational chart types

6. Team-based org structure

Team-based org chart example (click on image to modify online)

It’ll come as no surprise that a team-based organizational structure groups employees according to (what else?) teams—think Scrum teams or tiger teams. A team organizational structure is meant to disrupt the traditional hierarchy, focusing more on problem-solving, cooperation, and giving employees more control.

Pros

Increases productivity, performance, and transparency by breaking down silo mentality
Promotes a growth mindset
Changes the traditional career models by getting people to move laterally
Values experience rather than seniority
Requires minimal management
Fits well with agile companies with Scrum or tiger teams

Cons

Goes against many companies’ natural inclination of a purely hierarchical structure
Might make promotional paths less clear for employees

See why forming tiger teams is a smart move for your organization.

Learn

7. Network org structure

Network org structure example (click on image to modify online)

These days, few businesses have all their services under one roof, and juggling the multitudes of vendors, subcontractors, freelancers, offsite locations, and satellite offices can get confusing. A network organizational structure makes sense of the spread of resources. It can also describe an internal structure that focuses more on open communication and relationships rather than hierarchy.

Pros

Visualizes the complex web of onsite and offsite relationships in companies
Allows companies to be more flexible and agile
Give more power to all employees to collaborate, take initiative, and make decisions
Helps employees and stakeholders understand workflows and processes

Cons